Facts:The plaintiff provided ship repair and maintenance services to the defendant and rendered ten invoices in respect of the work done. Each of the ten invoices was marked “Due Upon Receipt” but made no mention of interest. The defendant failed to pay the first nine invoices. Shortly after the tenth invoice was sent, the parties entered into an oral agreement whereby the plaintiff granted an extension of four months to pay the outstanding invoices and the defendant agreed to pay $100,000 as a lump sum interest payment. The defendant failed to pay the agreed interest. The trial Judge held that the interest payment of $100,000 represented an interest rate in excess of 60% per annum and was therefore a criminal rate of interest under the Criminal Code . The trial Judge allowed interest at 5% per annum as provided by the Interest Act and awarded only $35,000 to the plaintiff on account of interest. The plaintiff appealed.
Held:The issue of whether the interest rate is criminal depends in part on whether the interest is calculated from the date of the oral agreement or from the date of the respective invoices. The defendant says it should be calculated from the date of the oral agreement since there was no agreement on interest before then. However, in maritime cases pre-judgement interest is always awarded as a function of damages. There was no need for a prior agreement on interest. Therefore, interest is to be calculated from the due date of the respective invoices and, when so calculated, does not exceed a rate of 60% per annum. The plaintiff is entitled to the agreed $100,000 on account of interest.